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International Trade is not a Competition – It’s a “Win Win”

There is a lot of noise about the “competitiveness” of countries as if they are companies, and how the world of globalization pits country against country as if they are corporate behemoths in a cage match.

This just in, governments are not companies, and the global business environment is not that simple. The math just doesn’t support it, but it surely makes for good fodder on the evening news or your congress person’s blog, assuming they dare to have one.

Let’s take a simple example and think about it for a minute.

Imagine we have two countries that only trade two products, just to humor us for a moment, and of course their wages are not equal.

So Country X can deliver product A at a better price than Country Y, but at the same time Country Y can similarly throw Product B back at them at a better price.

This is where it all comes down to productivity, not simple claims of “their wages are less than mine and they have a competitive advantage”.

It isn’t that simple no matter what the news is telling you.

The reality is that the countries trade and one gets a product at a lower price and equal value than they can produce it internally, while simultaneously the other gets another product they demand in an equal exchange. Otherwise, commercial jet planes and tube socks would be produced in all countries and we would all trade them at ridiculous price differences.

That is just not how it works, no matter what you hear.

“What the heck does that mean to me?” you say?

It is all about the Productivity, my friends!

So, let’s say you want to provide “world class” service way above your competition and still be price competitive. In order to offer your customers expert advice on strategic HR issues, you should find a trading partner to deliver transactional HR at a similar productivity and lower price.

This is a “Win Win” if you play it right.

You find the right partner that knows what they are doing of course, to provide your “transactional” HR at a better price with equal to similar productivity.

At the same time, you add more value and higher touch to your customers by enabling your team to answer phone calls and make suggestions that increase their bottom line.

Country X gets higher productivity from their labor that is focused on “high end” customer activity, while Country Y delivers more cost effective solutions in a related product. Neither country is better at all products and services.

One sells airplanes more effectively to the other that needs to fly people around, while the other writes software or performs BPO at an improved clip to make them look even better on Wall Street.

Both parties win, no matter what you hear. On top of that, both benefit because their employee’s wages increase along with productivity, because they focus on what they are good at and everybody wins.

We may not be global economists, but we do understand symbiotic relationships with our customers and have experience to boot.

 

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